It was a curious time in Washington DC last week. While the House Energy and Natural Resources Committee voted against three amendments on the validity of climate change science and its potential future impact, some 400 other people were meeting close to the Capitol at the IETA (International Emissions Trading Association) Carbon Forum North America. The Forum attracted a wide range of participants from House and Senate staff, state government policy makers, senior industry representatives of Fortune 100 companies and lead representatives of US policy think tanks and NGOs. All focused on a single key issue, the need for a clear way forward with regards CO2 legislation in the United States.
While legislative clarity is needed but remains in limbo, the nation has nevertheless pledged, and the Administration continues to reiterate, its goal to reduce emissions by 17% by 2020 relative to 2005. This was the subject of one of my early posts in April 2009 and at that time it looked to be a formidable undertaking even with a clear policy framework in place. Yet as I noted just a few months ago, much has changed as a result of the global financial crisis and the expanding role of natural gas in the economy.
Recent (late February) greenhouse gas data released by the EPA for the calendar year 2009 shows the impact of the recession, but also offers some further insight into the pathway forward. Economy wide emissions have dropped sharply, with the carbon intensity of the power generation sector dropping even faster.
In addition, revised EPA regulations are expected to have a significant impact on coal fired power generation. A study released by The Brattle Group last December assessed the impact of emerging EPA regulations on air quality, water use and ash disposal and the choice of retrofit or retirement for older coal fired units. The key conclusion of the study is that up to 66 GW of coal capacity could close by 2020. Natural gas is a potential and probably likely replacement. Although new nuclear is now in planning, any further acceleration could well be delayed by the events in Fukushima over recent days. Renewables will play a role, but I have assumed that they fill the demand gap for electricity versus current levels – i.e. they do not contribute to an actual reduction in emissions.
In addition to the power sector, the auto sector is also changing. Biofuels are continuing to come into the mix, revised CAFE standards are having an impact and by 2020 some (small) part of the fleet will be electric. Higher oil prices will almost certainly have some impact on vehicle use. Assuming an on-the-road efficiency of 22 mpg today and incoming vehicles improving from 27 mpg now to 35 mpg in 2020, a theoretical drop in gasoline consumption of just over 10% is possible, even with a rise in the total number of vehicles as population increases.
Pulling all this together and assuming some rise in industrial CO2 as the economy recovers, but no rise in other sectors as efficiency improvements take hold, it is possible to build a case for a reduction in CO2 emissions of up to 14% by 2020 vs. 2005.
But to get to 17% with some certainty, two additional changes are necessary. A further 35 GW of coal fired generation needs to be replaced by natural gas and the carbon footprint of the biofuels coming into the gasoline pool needs to improve beyond the madates for advaced biofuels. Both of these need a carbon price.
While it was clear in Washington last week that a sharp political divide remains in terms of progress on this issue, it was also clear from the IETA meeting that those actually making the decisions on new generating capacity are assuming a carbon price anyway. This assumption alone may well see the additional 35 GW go and allow the US to at least come close to meeting its international obligation.
[…] have discussed this before, but it is worthy of a revisit. There is no question that US emissions have fallen in part as a […]